Economic Foundations

Summary

Economics is about how we work, what we produce, how we interact, cooperate and compete, and how we distribute and ultimately use what we have produced. Because the economy is too important to be left to the economists, this course provides an introduction to economics that explains how a market economy works, why it sometimes does not work as well as we would like, how its performance can be improved by regulation and policy, and how over time it changes and develops. The course does not assume that the student has any prior knowledge of economics. The course has two parts: (1) microeconomics, which covers the standard topics of supply and demand, forms of market competition, imperfect competition, efficiency, labour markets and technological progress by firms; and (2) macroeconomics, which examines aggregate demand, growth, welfare, inflation, unemployment and globalization. In both parts, special attention is given to (economic factors explaining) the extraordinary technological dynamism and productivity growth of market economies and to government’s role in improving micro- and macroeconomic performance.

Microeconomics (2,5 ECTS) focuses on markets, and takes both the firm as the government as principal actors. How are firms' attempts to realize their objectives (in terms of profits, sales or market shares) influenced by demand, technology and market structure? How can public regulation improve market performance which falls below norms considered acceptable? We identify important market failures, due to which markets under-perform, and specifically investigate firm behaviour in (realistic) oligopolistic markets. Macroeconomics (2,5 ECTS) deals with the workings of the economy as a whole, why the market system often underperforms, and how macroeconomic performance can be improved by fiscal and/or monetary policy. Attention will be given to conflicts between achieving different goals of macroeconomic policy at the same time, and to the ways in which globalization affects the capacity of governments to regulate their economies. The answer to this question holds major lessons for public policy.